SMG returning $302,036 to county | PDF

EVANSVILLE - As a result of what both sides call an honest mistake, the management firm that runs The Centre for Vanderburgh County apparently has agreed to return $302,036 in incentive payments.

The arrangement with SMG Evansville was reported by County Attorney Ted Ziemer Jr. on Friday but could not be confirmed with SMG officials.

The incentive payments — $338,195 over the course of SMG's soon-to-end five-year contract with the county — were billed by SMG year-by-year. The $302,036 reimbursement figure was arrived at by subtracting a separate $36,159 incentive fee the county owes SMG.

Ziemer said SMG officials were operating under a mistaken understanding of the formula for calculating incentive payments to the company for generating revenue at The Centre. The incentive payments, when they are earned, come in addition to SMG's annual base management fee.

Ziemer pointed to a clause in the county's contract with SMG stating that incentive payments "will be calculated to encompass the gross receipts from each such event, less event expenses."

SMG officials have said little publicly about the situation. SMG General Manager Todd Denk declined to comment, but in brief remarks during last week's County Commissioners meeting, Denk characterized it as "an honest mistake that we were fortunate to catch."

"We want to do what we can to make this right and move forward in the positive relationship that we've had with the county for the last 10 years," Denk said.

The county's arrangement with SMG stated that if the company generated more than a predetermined revenue goal in a given year — the figure was $1.75 million when the current contract was signed — it was entitled to 25 percent of the extra money. But the amount was to be calculated after deducting expenses for events, which are paid by SMG initially but reimbursed by the county.

"According to (SMG), when they were working with us to do this new contract starting Jan. 1, 2006, they were assuming that that's what it was going to say — operating revenues without deducting event expenses, and that's what they had in their minds, and that's what their books would have shown would be appropriate," Ziemer said.

In 2006, Ziemer said, total revenue for The Centre amounted to roughly $2,039,000. Deducting event expenses of $765,000 left operating revenue of $1,274,000 — which, because it was less than that year's $1.75 million goal, did not entitle SMG to an incentive payment for that year.

But by SMG's calculations, Vanderburgh County owed — and paid — $75,000 in incentive payments that year.

Ziemer said the mistake by SMG — and Vanderburgh County's mistake in making the payments — was caught during a review of SMG's books before a decision on whether to sign another five-year contract.

County Commissioner Lloyd Winnecke said SMG officials report they presented the county with a "term sheet" while negotiating the current contract, but the term sheet contained different language.

"I am absolutely convinced they thought they signed something that said something that wasn't in the contract," Winnecke said.

Winnecke, the senior member of the three-member executive governing body's Republican majority in 2011 and its likely next president, said he believes the commissioners will sign a new five-year contract with SMG before the Dec. 28 deadline to do so.

Winnecke and Ziemer each said any new contract will contain clear and unambiguous language about incentive payments that should eliminate any future misunderstandings.

"If I thought for one second there was intent on (SMG's) part to not be 100 percent aboveboard, I would not be in favor of renewing our relationship with them," Winnecke said.